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Formal announcement of US-China trade deal phase one expected on Friday

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    ActionForex.com
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    It’s reported that US President Donald Trump has already signed off the phase one trade agreement with China. A formal announcement is expected on Friday. The terms are believed to be generally agreed even though it could take some more time to finalize the legal texts.

    Under the agreement, China would buy as much as USD 50B in US farm products in 2020, doubling the purchases in 2017, before the start of trade war. Both sides would also cut the currently imposed tariffs by 50%. New tariffs would be put on hold.

    The news is welcomed by businesses. US-China Business Council President Craig Allen said “If signed, this is an encouraging first phase that puts a floor under further deterioration of the bilateral relationship. But this is just the beginning. The issues facing the US and China are complex and multi-faceted. They are unlikely to all be resolved quickly.”

    However, the reactions from politicians are mixed, even within Trump’s Republican party. Republican Senator Marco Rubio warned, “White House should consider the risk that a near-term deal with China would give away the tariff leverage needed for a broader agreement on the issues that matter the most such as sub sidies to domes tic firms, forced tech transfers & blocking U.S. firms access to key sectors”.

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    Dollar gets no support as ADP employment missed expectation

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      ActionForex.com
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      Dollar remains generally weak in early US session and receives no special support from a batch of mixed data.

      ADP report showed private sector jobs grew 178k in May, below expectation of 190k. Prior month’s figure was also revised down from 204k to 163k. Q1 GDP growth was revised down from 2.3% to 2.2% qoq. GDP price index was revised down from 2.0% to 1.9%. Wholesale inventories rose 0.0% versus expectation of 0.5% in April. Trade deficit narrowed slightly to USD -68.2B, from USD -68.3B.

      From Canada, IPPI rose 0.5% mom in April while RMPI rose 0.7% mom. Current account deficit widened to CAD -19.5B in Q1. Focus will turn to BoC rate decision.

      Australia consumer confidence dropped sharply despite RBA rate cuts

        By
        ActionForex.com
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        Australia Westpac Consumer Confidence dropped sharply by -4.1% to 96.5 in July, hitting a two year low. The deterioration came as a surprise as confidence was not supported by recent positive developments, including RBA’s rate cuts and easing US-China trade tensions.

        Deepening concerns over Australian economic outlook were the main drivers in decreasing confidence. Expectations in economic conditions for the next 12 months dropped -12.3 to 87.1. That’s the lowest level in four years. For the next 5 years, expectations index dropped -6.7 to 91.6.

        After two rate cuts in June and July, Westpac expects RBA to stand pat at next meeting on August 6. Updated economic projections to be released then would give the best guide to how the RBA sees the case for further policy action. Westpac expects a further 25bps cut most likely coinciding with a downgrade to the Bank’s growth and inflation forecasts in November. Though, it said “the timing of this next move remains highly uncertain”.

        Full release here.

        Fed Kaplan: Coronavirus trends are in the wrong direction

          By
          ActionForex.com
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          Dallas Fed President Robert Kaplan warned that the “trends are in the wrong direction” regarding coronavirus trends. He’s still expecting the economy to be around -2.5% smaller by year end, comparing to last year. Growth is expected to be around 3.5% next year. However, rising coronavirus spread could drag down growth this year and early next year.

          Separately, Cleveland Fed President Loretta Mester said Fed Chair Jerome Powell will discuss with the Treasury to decide whether to extend the emergency lending programs beyond the end of the year. But in her view, “but in my view, if it were me, I would extend all of them,” Mester said. “The fact that they exist provides confidence to the markets.”

          Australian Dollar jumps as employment data strong on all front

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            ActionForex.com
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            Australian Dollar surges broadly as June employment data came in strong on all front.

            Headline job grow jumped to 50.9k seasonally adjusted , well above expectation of 16.6k. Prior month’s figure was also revised slightly up by 12k to 13.5k. Full time jobs grew 41.2k while part time jobs also rose 9.7k. Together with the surge in full time jobs, total hours worked rose 0.6%

            Unemployment rate remained unchanged at 5.4%. But without rounding, it’s actually the at its lowest since November 2012. Labor force participation rate rose 0.2% to 65.7%. Employment to population ratio also rose 0.2% to 62.1%.

            Also from Australia, NAB Quarterly Business Confidence dropped to 7 in Q2.

            AUD/NZD rebounded ahead of 1.0844 support and retained near term bullishness in the cross. Price actions from 1.0991 short term top now look more like a consolidation pattern. Focus is back on 61.8% retracement of 1.1289 to 1.0486 at 1.0982. Firm break there will resume the whole rise from 1.0486.

            Japan industrial production dropped -7.2% mom in may, worst in two years

              By
              ActionForex.com
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              Japan industrial production dropped -7.2% mom in May, much worse than expectation of -0.3% mom. That was also the worst contraction in two years, since the -10.5% mom decline in May 2020.

              The index of production at factories and mines stood at 88.3 against the 2015 base of 100. Index of industrial shipments dropped -4.3% mom to 89.0. Inventories dropped -0.1% mom to 98.5.

              Nevertheless, manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to rebound 12.0% in June, followed by a 2.5% expansion in July.

              OECD: China at a crossroad, should lower external and internal barriers

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                ActionForex.com
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                In an OECD survey report, Deputy Secretary-General Ludger Schuknecht, warned that “China is at a crossroads, facing serious domestic and external challenges to maintaining its strong position over the long-term.”. He urged that “policy should seek to ensure a better functioning economy that delivers stable and inclusive growth for all.”

                OECD said China should aim to “further lower import tariffs and dismantle non-tariff barriers and barriers on the entry and conduct of foreign firms, in particular requirements to form joint ventures or transfer technology.” Also, “ongoing fiscal stimulus should avoid directing credit to state-owned enterprises and local governments”

                Additionally, there are :wide scope to improve efficiency across the economy, notably by reducing the internal barriers that hinder product market competition and labour mobility.”. And measures include “stronger protection of intellectual property rights; gradual removal of implicit guarantees to state-owned enterprises, allowing them to default; and reduction of state ownership in commercially-oriented, non-strategic sectors.”

                Full release here.

                Gold finished triangle consolidation, ready to resume up trend?

                  By
                  ActionForex.com
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                  Gold’s break of 1723.36 resistance overnight suggests that triangle consolidation from 1747.75 might have finally finished. Focus is immediately back on this high. Break will resume larger up trend. 61.8% projection of 1160.17 to 1703.28 from 1451.16 at 1786.80 will be an important hurdle to overcome. Sustained break there could prompt upside acceleration for the medium term. Meanwhile, break of 1711.14 minor support will dampen the bullish case and bring more range trading first.

                  US initial jobless claims dropped to 400k, worse than expected

                    By
                    ActionForex.com
                    -

                    US initial jobless claims dropped -24k to 400k in the week ending July 24, above expectation of 365k. Four-week moving average of initial claims rose 8k to 394.5k.

                    Continuing claims rose 7k to 3269k in the week ending July 17. Four-week moving average of continuing claims dropped -54k to 3291k, lowest since March 21, 2020.

                    Full release here.

                    ISM non-manufacturing dropped to 56.6, employment down to 50.1

                      By
                      ActionForex.com
                      -

                      US ISM Non-Manufacturing Composite dropped to 56.6 in October, down from 57.8, missed expectation of 57.8. Business activity dropped -1.8 pts to 61.2. New orders dropped -2.7 pts to 58.8. Employment also dropped -1.7 to 50.1.

                      ISM: “According to the Services PMI, 16 services industries reported growth. The composite index indicated growth for the fifth consecutive month after a two month contraction in April and May. There has been a slight pull back in the rate of growth in the Services Sector in the month of October. Respondents’ comments are cautiously optimistic about business conditions and the economy. There is a degree of uncertainty due to the pandemic, capacity constraints, logistics and the elections.”

                      Full release here.

                      Australia’s retail sales falls -0.4% mom in Mar amid cost of living pressures

                        By
                        ActionForex.com
                        -

                        Australia’s retail sales fell -0.4% mom in March, well below expectation of 0.2% mom.

                        Ben Dorber, ABS head of retail statistics, highlighted the impact of cost of living pressures on consumer behavior.

                        He further noted the stagnation in the sector, stating, “Underlying retail turnover has been flat for the past six months and was up only 0.8 percent compared to March 2023.”

                        This represents one of the weakest growth rates on record for this period, excluding the unique economic circumstances induced by the pandemic and the introduction of GST.

                        Full Australia retail sales release here.

                        EU Centeno: Franco-German recovery fund a critical part of larger and coordinated coronavirus response

                          By
                          ActionForex.com
                          -

                          In an interview with German weekly Welt am Sonntag, Eurogroup head Mario Centeno said that the Franco-German proposal of EUR 500B recovery fund could be a “critical part” in the “larger and coordinated” coronavirus response”. It would “allow us to protest the single market in the recovery phase”. He added that “the German-Franco proposal would be a great step towards a fiscal union and a properly functioning currency union, even if the recovery fund is only temporary.”

                          He admitted that “we will all come out of this crisis with higher debts”. Hence, it’s important for the Eurogroup to agree on a recovery fund that “spread the costs of the crisis over time”. The France-German initiative was also “one step forward in addressing the debt overload issue by proposing common debt issuance.”

                          On the economy, Centeno said the forecasts so far do not take into account the EUR 500B reconstruction funds and the frontloaded EU budget. He added, “this enormous stimulus will strongly accelerate economic recovery”. “By the end of 2022, most – if not all – EU countries will return to 2019 GDP levels”.

                          Full interview here.

                          ECB: Forward EONIA curve does not suggest firm expectation of imminent rate cut

                            By
                            ActionForex.com
                            -

                            In the monthly Economic Bulletin, ECB said ‘the resurgence in coronavirus (COVID-19) infections presents renewed challenges to public health and the growth prospects of the euro area and global economies… the associated intensification of containment measures is weighing on activity, constituting a clear deterioration in the near-term outlook.”

                            ECB also noted that “forward curve of the euro overnight index average (EONIA) shifted slightly downwards and remained mildly inverted”. The curve “does not suggest firm market expectations of an imminent rate cut”. Though, “long-term sovereign bond spreads declined steadily across euro area countries, amid expectations of further monetary policy and fiscal support.”

                            It’s also reiterated that new round of macroeconomic projections in December ” will allow a thorough reassessment of the economic outlook and the balance of risks”. On that basis, ECB will “recalibrate its instruments, as appropriate, to respond to the unfolding situation”.

                            Full release here.

                             

                            Japan CPI core dropped to -1% yoy in Dec, worst since 2010

                              By
                              ActionForex.com
                              -

                              Japan CPI core (all item ex-fresh food) dropped further to -1.0% yoy in December, down from -0.2% yoy, but was above expectation of -1.1% yoy. That’s still the biggest annual decline in core inflation since September 2010. Headline CPI (all items) dropped to -1.2% yoy, down from -0.9% yoy. CPI core-core (all item ex-fresh food and energy) dropped to -0.4% yoy, down from -0.3% yoy.

                              “I don’t think the risk of Japan sliding back into deflation is high,” BOJ Governor Haruhiko Kuroda insisted yesterday. “But potential growth may be falling so we need to look at the impact (on prices) carefully.”

                              Full release here.

                              UK Johnson pledges no further Brexit delay after another Commons defeat

                                By
                                ActionForex.com
                                -

                                UK Prime Minister Boris Johnson suffered his sixth consecutive defeat at the Commons yesterday. His second call for snap election was also rejected as widely expected. The Commons is now suspended for five weeks.

                                At the same time, Johnson pledged after the vote that “this government will press on with negotiating a deal, while preparing to leave without one,” referring to Brexit. And, “I will go to that crucial summit in Brussels on Oct. 17, and no matter how many devices this Parliament invents to tie my hands, I will strive to get an agreement in the national interest.”

                                Johnson also insisted “this government will not delay Brexit any further.” That even the Parliament has passed a law that requires Johnson to seek Brexit delay from October 31 if he couldn’t get a deal.

                                UK CPI slowed to 2-year low, Sterling shrugs

                                  By
                                  ActionForex.com
                                  -

                                  UK CPI slowed to 1.8% yoy in January, down from 2.1% yoy and missed expectation of 2.0% yoy. That’s also the lowest level since January 2017. Core CPI was unchanged at 1.9% yoy, matched expectations. ONS noted that the largest downward contribution to the change in the 12-month rate came from electricity, gas and other fuels. Meanwhile, these downward effects were partially offset by air fares.

                                  Also from UK,

                                  • RPI slowed to 2.5% yoy, down from 2.7% yoy, below expectation of 2.5% yoy.
                                  • PPI input slowed to 2.9% yoy, down from 3.2% yoy and missed expectation of 3.8% yoy.
                                  • PPI output slowed to 2.1% yoy, down from 2.4% yoy and missed expectation of 2.2% yoy.
                                  • PPI output core was unchanged at 2.4% yoy, above expectation of 2.3% yoy.
                                  • House price index slowed to 2.5% yoy, down from 2.7% yoy, matched expectations.
                                  • Sterling dips mildly after the release. But loss is so far very limited.

                                  Australia retail sales rose 0.6%, AUD extending near term recovery

                                    By
                                    ActionForex.com
                                    -

                                    Australia retail sales rose 0.6% mom in February, beating expectation of 0.3%. But building approvals dropped -6.2% mom, worse than expectation of 54.5.

                                    AUD is responding well to easing of risk aversion. But it’s not totally out of the dark yet.

                                    For example, AUD/JPY 6H action bias just turned positive, indicating the the recovery is gaining momentum.

                                    However, D action bias is just neutral.

                                    W action bias is negative through and through.

                                    Hence, for the near term, there could be more upside in the cross as recovery extends. But upside potential would be limited as it’s a corrective move. Or, until there is firm signal of trend reversal.

                                    Into US session: Euro soft on weak GDP, Sterling and Yen even worse

                                      By
                                      ActionForex.com
                                      -

                                      Entering into US session, Sterling, Yen and Euro are the weakest ones today while commodity currencies are generally firm. Sterling’s weakness is clearly due to Brexit negotiation impasse. And it’s facing more tests from PMIs and BoE’s Super Thursday later in the week. Euro is weighed down by weak economic data. Eurozone GDP growth halved to 0.2% qoq in Q3. Confidence indicators deteriorated more than expected this month. Italy GDP stalled in Q3 too, giving the coalition government more reason to stick with its expansive budget plan for 2019.

                                      On the other hand, Australian Dollar leads other commodity currencies higher. US stocks staged a stunning bearish reversal yesterday on talks that Trump is going to impose more tariffs on China. But Chinese stocks somehow shrugged, ended up 1%. European indices are mixed at the time of writing. The calm markets provided support to commodity currencies and weighed down on Yen.

                                      In Europe, at the time of writing:

                                      • FTSE is up 0.21%
                                      • DAX down -0.27%
                                      • CAC down -0.21%
                                      • German 10 year yield is down -0.0001 at 0.379
                                      • Italian 10 year yield is up 0.088 at 3.426. Spread back above 300.

                                      Earlier today in Asia:

                                      • Nikkei closed up 1.45% at 21457.29
                                      • Singapore Strait Times closed down -0.51% at 2966.45
                                      • Hong Kong HSI closed down -0.91% at 24585.53
                                      • But China Shanghai SSE rose 1.02% to 2568.05

                                      Japan PPI rose record 9.3% yoy in Feb, led by energy and commodities

                                        By
                                        ActionForex.com
                                        -

                                        Japan corporate goods price index rose 9.3% yoy in February, above expectation of 8.7% yoy. At 110.7, the index hit the highest level marked since 1985. That’s also the highest rise on record, as led by skyrocketing energy prices. Coal and petroleum prices jumped 34.2% yoy. Electricity, city gas and water prices also surged 27.5% yoy.

                                        Commodity prices also surged with iron and steel up 24.5% yoy. Nonferrous metal rose 24.9% yoy. Lumber and wood products rose 58.0% yoy.

                                        Import prices rose 34.0% yoy while export prices rose 12.7% yoy.

                                        Today’s top mover: GBP/NZD in near term consolidation, medium term bearish

                                          By
                                          ActionForex.com
                                          -

                                          GBP/NZD is the biggest mover today as Sterling suffered renewed selling. On the other hand, Kiwi and Aussie remain firm despite rally in Dollar.

                                          Nevertheless, GBP/NZD is staying above 1.8659 support despite today’s fall. It’s technically staying in consolidation and more sideway trading could be seen. But even in case of another recovery, upside should be limited by 1.9282 resistance to bring fall resumption.

                                          In our view, the medium term corrective rise from 1.6684 (2016 low) should have completed at 2.0469. Fall from 2.0469 is still in progress. Break of 1.8659 would target 61.8% retracement of 1.6684 to 2.0469 at 1.8130.

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